Offset mortgage: A consumer's gold mine

2007-03-08 10:33:40

( Financial )



If you want to get a hold of your mortgage and pay less on borrowings, or if you have savings but have a bigger mortgage than you do savings, then an offset mortgage is for you.

An offset mortgage is where interests on your mortgage are diminished by funds from your current and savings accounts. This means that the more funds you have in both current and savings accounts, the lesser interest you pay on your mortgage. With an offset mortgage you save a considerably big amount of money and get to pay off your mortgage faster. The only catch is you don't earn any interest on both your current and savings accounts. This however is insignificant compared to what you get to save on mortgage payments in the long run.

The aim of an offset mortgage is that with less interest to pay, you are able to pay off your mortgage in the fastest time at the least cost. So instead of giving you a small interest in return, your savings account works to reduce mortgage payments and pay off your mortgage faster. Some lenders have in fact claimed that if you have a sizable amount in savings, you don't get to pay any interest at all on your mortgage borrowings.

There are a lot of reasons why offset mortgage has emerged a best-seller in mortgaging during the past couple of years. Aside from the savings you get on mortgage payments, you can consolidate all your debts into the offset mortgage product and repay them at a cost lower than the normal rate. Further, even if you pay these other debts at the mortgage rate, they remain unsecured. This means that should you be unable to keep up with repayments on these other loans, your home is not jeopardized.

Most offset mortgage products also have attractive features that allow you to draw down cash, make underpayments or overpayments, calculation of interest on a daily basis and payment holidays. These features may vary depending on the lender. To the advantage of borrowers, lenders are also adding more special features on offset mortgages in order to keep up with the competition

So far, the biggest draw to offset mortgages is the attribute of having your mortgage and savings account separate but working together. Having a separate account for savings and debts gives clients a feeling of security unlike a single account which seems like a large overdraft.

To get the best offset mortgage products, talk through your options with a financial specialist or lending institution. You an also avail of other financial products like zero interest balance transfers, no interest balance transfer, 0 apr on balance transfers, low interest balance transfer or 0 apr on balance transfer.


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